Vol. 148, No. 21 — October 8, 2014

Registration

SI/2014-76 October 8, 2014

FINANCIAL ADMINISTRATION ACT

British Columbia Indemnity Interest Remission Order (HST)

P.C. 2014-939 September 18, 2014

His Excellency the Governor General in Council, considering that it is in the public interest to do so, on the recommendation of the Minister of Finance and of the Treasury Board, pursuant to subsection 23(2.1) (see footnote a) of the Financial Administration Act (see footnote b), makes the annexed British Columbia Indemnity Interest Remission Order (HST).

BRITISH COLUMBIA INDEMNITY INTEREST REMISSION ORDER (HST)

Remission of interest

1. (1) Remission is granted to British Columbia of the interest payable under subsection 155.1(1) of the Financial Administration Act in respect of the province’s obligation under the Comprehensive Integrated Tax Coordination Agreement between the Government of Canada and the Government of British Columbia to indemnify Her Majesty in right of Canada in an amount equal to the assistance amount of $1,599,000,000 received by the province under that agreement.

Condition

(2) Remission is granted on condition that the amount of the indemnity referred to in subsection (1) be paid in five equal payments of $319,800,000, with the first and second payments having been made on March 30, 2012 and March 28, 2013 respectively, and the third, fourth and fifth payments to be made on or before March 28, 2014, March 27, 2015 and March 25, 2016, respectively.

Partial remission

2. If a payment is not made on or before the date that is specified in subsection 1(2), remission is granted to British Columbia of the interest payable under subsection 155.1(1) of the Financial Administration Act, in respect of the province’s obligation referred to in subsection 1(1), that is attributable to the period that begins on March 28, 2012 and ends on the day before the date specified in subsection 1(2) in respect of the first missed payment.

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

The annexed British Columbia Indemnity Interest Remission Order (HST) provides for the remission to the Province of British Columbia of the interest payable by the Province, under subsection 155.1(1) of the Financial Administration Act, in respect of British Columbia’s obligation, under the Comprehensive Integrated Tax Coordination Agreement (CITCA) between the Government of Canada and the Government of British Columbia, to indemnify Canada in an amount equal to the $1,599 million of transitional assistance provided by the Government of Canada to the Province of British Columbia under the CITCA.

Objective

To serve the public interest.

Background

British Columbia received $1,599 million in transitional assistance for the adoption of the Harmonized Sales Tax (HST) under the CITCA. A key requirement under the CITCA is that the Agreement not be terminated before July 1, 2015, the fifth anniversary of the implementation of the HST. However, the Government of British Columbia took the decision to exit the HST and reinstate a provincial sales tax effective April 1, 2013 (i.e. earlier than the required five-year commitment period). This decision constituted a material breach of the CITCA. British Columbia’s decision to exit the HST on April 1, 2013, has led to the obligation for the Province to repay the transitional assistance amount as an indemnity to Canada under the CITCA. British Columbia and Canada have agreed to a repayment schedule. By this Order, Canada agrees not to charge any interest over the repayment period, as long as the required payments are made by the Province in accordance with the agreed upon repayment schedule.

Implications

The cost of this Remission Order is estimated to be $136 million over the five-year repayment schedule.

Departmental contact

Terence Brown
Sales Tax Division
Department of Finance
L’Esplanade Laurier
140 O’Connor Street
Ottawa, Ontario
K1A 0G5
Telephone: 613-992-4384